Congressman Charlie Rangel (D-NY) has introduced legislation to expand the Earned Income Tax Credit similar to the proposal by President Obama while also expanding the refundable portion of federal program to Puerto Rico and other territories.
His EITC for Childless Workers Act of 2014 includes the following changes:
- Drops the qualifying age to 21 from 25
- Raises the maximum EITC a childless adult can receive to $1,500 (currently $496)
- For single and no children, phase-out begins at $16,630 (currently $8,110) and ends at $23,110 (currently $14,590)
- For married childless workers, phase-out begins at $24,630 (currently $13,540) and ends at $31,110 (currently $20,020)
- Indexed to inflation
- Extends refundable EITC to the residents of U.S. possessions, including the Commonwealths of Puerto Rico and the Northern Mariana Islands.
The Center on Budget and Policy Priorites favors the legislation, which is intended to help lift the working poor out of poverty. They point out that a childless man working fulltime at minimum wage will make $14,500 this year and pay $2,617 in federal income tax and payroll taxes, about 18% of his income, even after receiving a $22 EITC. Workers under the age of 25 are usually not eligible for any EITC.
While research has shown that people in the states who get and keep a job of any kind will be able to work themselves out of poverty in an average of five years, five years of working hard at a full time job and continuing to live in poverty may be disheartening, and the working poor often face hardships related to transportation, health care, and child care that make it difficult to keep a job. The EITC helps to encourage workforce participation among those whose tangible rewards for their work may be limited.
In Puerto Rico, no worker is eligible for EITC, though the per capita income is low enough that most workers would be eligible if Puerto Rico were a state. Extending the EITC to Puerto Rico as in Rangel’s bill would provide a tool in addressing Puerto Rico’s economic woes.